Manulife Financial (MFC.TO)

Canadian banks or Manulife (MFC-T)? Until recently, he thought lifecos showed relatively better valuation than banks. The environment has got to the point now where flight to safety might be tilting a little bit more towards banks. Management has done a superb job since they were in trouble previously and had to cut their dividend. Have changed their product mix so that it is a lot less risky and less exposed to equity markets. Have really built up the wealth side of their business giving them good fees. Expanded in the US through John Hancock and are expanding into Asia quite a bit. A very good long-term hold.

(A Top Pick Nov 4/14. Up 5.2%.) This has to decouple from the interest rate outlook to the value proposition. He thinks there is still upside on the stock. From a pure Book Value, pure Coverage Ratio and pure Earnings Power with its exposure to Asia, it still looks interesting to him.

The lower oil prices hurt some of the holdings. Business in Europe is picking up. Once you have had your fill with bank stocks, take a look at this one.

Just sold his holdings and switched into Sun Life (SLF-T). Both are very fine companies. Sun Life has a little bit higher yield, but trades at a little higher multiple. Both companies will benefit from an eventual increase in rates.

All lifecos will benefit in a rising interest rate environment. Recent earnings reported were not that fantastic and thinks this has to do with the historic volatility of their earnings. Doesn’t think the market is giving the lifecos the benefit of the doubt, but there is no question that this is a good way to play a rising rate environment.

Stock vs. Stock. MFC-T vs. SLF-T. MFC-T has 10% earnings growth for the next couple of years and SLF-T is a little less than that. Times like this are a buying opportunity.

Metrlife (MET-N) or Manulife (MFC-T). Which has a better upside? All things being equal, and if she liked both of them equally, she would prefer the Canadian stock because of the currency. They have good business in Asia which, longer-term, is going to be a good growth area. Lower interest rates are going to be a headwind, but that is a non-core issue. Valuation is not onerous and it provides an attractive yield.

It is going to be hard for all of the insurance companies to break out of this rut in the current conditions. (See comments under Prudential (PRU-N).)

If interest rates rise, this will work. If they don’t, it will stay in the same range. Excellent company. The company has been de-risked to such an extent that the increase in equities hasn’t really driven the company to a higher level. Because of this, he prefers Sun Life (SLF-T). If you have a longer-term outlook, this is fine.

Given where interest rates are, it is getting more and more difficult for these insurance companies to deliver on products that promise to payout a high rate for decades.

The stock had a really good run over the last couple of years. They are very levered to higher interest rates. The story got a little ahead of itself. A better growth profile than the banks. He has no trouble holding it.

Expects that in the next 12-24 months we are going to have higher yields, which will be a tailwind for this company. 45% of earnings is coming from the US. Trading below its five-year average. Solid top and bottom-line trends in Asia. Yield of 3.05%.

He has an issue with the low interest rate environment and insurance companies. But they have brought their leverage down and that has helped them. They would like to do acquisitions, but the big ones are few and far between. They can grow their ROE, but you need to still see less leverage on their balance sheet. He prefers SLF-T where they have the asset management business.

Manulife (MFC-T) or Sun Life (SLF-T)? Both of these companies pay decent dividends in the 3%-4% range, but the business doesn’t seem to grow very much. They don’t do very well in a low interest rate environment. He would rather do something else with his money. Not his kind of investment.

This is under a lot of pressure. The interest rate scenario is obviously not positive for insurance companies. The CEO wants to get the company up to $4 billion in core revenue, and right now they are at about $3 billion. They are going to need a lot of things to go right in order to get the last billion dollars squeezed out. He is right on the edge about being nervous in owning this name. 50% of their revenues are coming in from abroad including the US and Asia. They need a better market and they need rates to go up for them to do much better from here.